Queen's Walk Investment Share Discussion Threads

[envirovision] 19/8/2010 11:44

I think I will be taking up my full entitlement since as a shareholder its the only way to avoid dilution and an effective loss of the discount to NAV currently enjoyed at present.

For those thinking ISA, the prospectus seems to suggest that after consultation with HM Revenue, the ords issued in the offer are not entitle to be allocated into an ISA, but the preference share bonus issue will be. See page 114.

Rat thanks for clarifying £1 redemption value of the preference shares. Prehaps its for ISA reasons they are not declaring par value.

[eeza] 19/8/2010 08:39

Since the Prefs are being given, at no actual cost, then they should be added to the ISA. IMO.

Tight spread now. 219 vs 219.

[holts] 19/8/2010 08:31

if the prefs have no par value and the ords are already in an isa , can the prefs be added to your isa even if you have already subscribed the full cash amount for this years allowance?

[rat attack] 19/8/2010 08:07

envirovision - all prefs are repaid at par ie £1. Prefs have notional value of £1. Rights are explained on pages 103-104.

Rights as to capital
On a return of capital on liquidation or otherwise (other than by way of repurchase or redemption of Shares in accordance with the Articles and the Companies Law) the assets of the Company available for distribution among the Shareholders shall be applied first in repaying to the Preference Shareholders the sum of £1.00 per Preference Share (the "Preference Share Notional Value") together with a sum equal to any arrears and accruals of the Preference Dividend and any further sum payable in respect of the Preference Dividend in each case calculated down to the date of the return of capital and to be payable whether or not such dividend or further sum has been declared or earned (the "Repayment Amount"). Secondly, the balance of such assets shall belong to and be distributed among the Ordinary Shareholders in proportion to the number of Ordinary Shares held by them.

Rights as to redemption
The Preference Shares shall be issued as redeemable shares within the meaning of the Companies Law. The Preference Shares shall be redeemed by the Company in the following circumstances, in accordance with the terms of, and subject to the conditions set out in, applicable law and regulation including the Companies Law and the Revised Articles:

(a) at any time, by way of the purchase of any such Preference Shares by the Company through the facilities of the London Stock Exchange; or
(b) upon a change of control of the Company (defined as the acquisition by a single person or persons acting in concert of more than 50 per cent. of the voting rights attached to the Ordinary Shares), but only if a majority of Preference Shareholders attending and voting at a special class meeting of Preference Shareholders (which shall be convened within 60 days of the change of control) so resolve by way of an ordinary resolution, at a price equal to the Repayment Amount; or
(c) if more than 75 per cent. of the Preference Shares have been redeemed before the expiration of the seven year period referred to under paragraph (d) below, by way of a mandatory redemption programme launched by the Company at its sole discretion, at a price equal to the higher of (i) the Repayment Amount, or (ii) the average mid-market closing price over the five Business Days prior to the announcement of the launch of such programme; or
(d) if not redeemed earlier pursuant to paragraphs (a), (b) or (c) above, on a date that is seven years after their issue at the Repayment Amount.
Redeemed Preference Shares shall be cancelled or held in treasury (subject to all applicable legal and regulatory restrictions).

[envirovision] 18/8/2010 22:05

These preference shares look pretty tasty from a quick scan, still short on time this evening to finish. They come with a tax credit, they are cumulative take priorty of payment and have penalty interest provisions upon late payment, they can go in an ISA, they are paid quarterly (31 March, 30 June, 30 September and 31 December), they have priority over ords in all respects bar voting.

I seem to be missing a few bits of info, whats the redemable terms after 7 years what page is that on? why are they talking about £1 par value but then claiming they have no value at par, whats that all about?

[eastwind] 18/8/2010 16:52

According to the prospectus, the interest of the preference share is cumulative, ie. interest is paid on dividend if the dividend is not paid in time. There is no penalty interest rate such as 15% or 20% applied to RUSP if dividend is not paid in time.

The dividend rate of 8% is low, so the cumulative effect is not high. That could be the reason why the fund manager is to dispose of the bonus preference.

[horndean eagle] 18/8/2010 14:24

Circulars now available for download on the website.

[rat attack] 18/8/2010 12:00

I must admit to holding for the yield even allowing for the underlying portfolio risk and was looking to increase, but fortunately this restructuring came out before I did! However, in view of this I propose to take a back seat and wait and see how the new prefs trade before adding there and I am questioning whether the ordinary have any attraction even if they do manage to narrow the NAV discount, which I doubt given the asset profile.

[timanglin] 18/8/2010 11:46

I think we(on the bb) are all minority shareholders.

[rat attack] 18/8/2010 10:28

erstwhile2 - the calculations are correct, therefore no mistake. The bonus issue preference shares are calculated as at close of business 16 September, which includes all shares held, and new shares taken up, by Qualifying Bonus Issue shareholders. The assumption to include all shares will be inaccurate as we have no knowledge of the number of shareholders prohibited by jurisdiction - however this figure is likely to be minimal!

[timanglin] 18/8/2010 09:49

The issue seems to be whether future earnings will be diluted by this move, which only time can tell. However the 'old' qwil, was paying approx. 13% dividend(depending on entry price), was debt free, and was re-investing the earnings not spent on the dividend(?50% of earnings) and as such was on an upward trajectory. The future question is whether the 'new' qwil will have as high an ujpward trajectory, I can only assume that the management think so, otherwise they would not have done this. imho, dyor.

[cerrito] 18/8/2010 08:39

Thank you Insipiens for that clarification.

The FT yesterday had the following:
Cheyne Capital, one of London's most prominent credit hedge funds, is poised to reorganise its listed vehicle Queen's Walk Investment, which was an early victim of the global housing slump when it hit in 2007.

Losses at the fund, which specialised in investing in complex mortgage assets, presaged the collapse of Northern Rock and the spread of problems in the US subprime housing market into the UK.


In spite of a broad recovery across housing markets over the past 18 months, shares in Queen's Walk have traded at a significant discount to the value of the fund's actual assets, valued at more than €100m (£82m). Shares have been trading at as much as a 35 per cent discount recently.

Cheyne aims to refocus the fund on opportunities in more liquid mortgage-backed assets, according to people familiar with the plan, which is due to be disclosed on Tuesday. It is hoped that the move will narrow the share price discount.

Shareholders will be presented with a plan to alter the funds' investment policy and agree to an open offer from Cheyne that will inject a further €25m into the fund. The money will go towards purchasing a new tranche of mezzanine-level mortgage-backed credit.

The fund has been running off its existing investments in illiquid asset-backed instruments for the past year. Since February, Queen's Walk has sold three large legacy assets, all accretive to the fund's net asset value.

Trading on mezzanine asset backed securities has proved a profitable strategy for Cheyne, which runs $6bn (£3.8bn) of hedge fund and credit strategies.

The fund manager's $550m real estate debt fund, launched in August 2009 to pursue the same strategy, has returned 24 per cent since its inception.

By the end of the year, the plan will aim to have 40 per cent of Queen's Walk's total funds invested in the more liquid mortgage debts.

Other hedge funds that have moved to capitalise on the upswing in the UK and European mortgage market include Toscafund, which began raising capital to purchase £500m of UK residential mortgages and mortgage-backed bonds this year.

[insipiens] 18/8/2010 07:22

Cerrito, you only need enter +44 in the phone number field to access, but prospectus not posted yet (at this time).

[envirovision] 17/8/2010 23:25

Hi rat will double check when i've more time. Meantime some press info on it:

[cerrito] 17/8/2010 21:14

has anyone tried to access the web site to get the prospectus??entered in UK and my UK phone number and was denied access due to UK securities laws.
all very odd and will need to get prospectus from company

[rat attack] 17/8/2010 17:37

envirovision - calc for your info:

26,644,657 shares in issue @ 31.3.10
13,322,328 shares issued 16.9.10
39,966,984 Total shares in issue @ 16.9.10

€ 99,384,570 NAV based on €3.73 per share @ 31.3.10
€ 4,880,000 NAV based on new shares issued after costs 16.9.10
€124,264,570 Total NAV @ 16.9.10

€ 59,950,476 new preference shares issued @16.9.10 (39,966,984 x 1.25 = £49,958,730 x 1.20 £/€ rate)

adj NAV €124,264,570 - €59,950,476 = €64,314,094
adj NAV per share €1.61 (€64,314,094/39,966,984)

Hope this helps - from what I can see you didnt convert your prefs from £ to €, therefore you have inconsistant currency calculations (apples and pears)!

3 points:
a) I do not feel that American Capital is a comparable because their income stream is guaranteed by US govt and CMBS/RMBS has no such support, therefore I see no reason why the asset should trade at a premium when a discount is more appropriate. The question remains whether a 35% discount, as at present, is warranted?

b) I think you are being over optimistic on the required coupon required on the prefs given the risk profile. I dont believe 8% is a sufficient yield given that the NW prefs currently pay this and at the other extreme, Raven Russia yield 11.4%! I believe the yield will settle in the 10-12% range.

c) I also have a concern on the new portfolio in terms of which part of the capital structure is being acquired because a max LTV of 85% does not give a great deal of latitude if you are in the junior/lower tranches!

I dont know of any other funds besides American Capital that are quoted and in the case of European funds, these were previously but together by the Investment Banks with deal profiles to fit their customer requirements, mostly quoted on the Irish Stock Exchange!

[zastas] 17/8/2010 17:12

There's another angle too: I believe the Prefs will be free of income-tax for basic-rate payers, the bond-equivalent of 10% yield. So should be relatively more attractive for UK residents than the current ordinaries.

[envirovision] 17/8/2010 15:37

I dont understands rats take. All my calcs in Euro unless shown otherwise.

Theres 26,640,000 shares in issue with a NAV of at least 3.73 (99,367,200)
add to that a further 13,322,328 shares to be issues (24,880,000 after costs) makes total worth of 124,247,200 with 39,962,328 shares in issue + 49952910 pref shares as 1.25 x the ords at nominal £1 or EU1.22, therfore worth (49,972,890)

So we have 49972890 less 124247200 / 39962328 = 1.86 per share

So in otherwords you will have the ords trading at EU1.86 whilst your prefs would be £1 so you would also have 1.25x the prefs than the amount of ords you currently hold.

Assuming you bought these at 2 like me then that means if I do nothing I have for every share I own: £1.25 worth of pref shares paying 8%PA and EU1.86 ord shares paying EU0.20 ? PA this calculated by adjusted for the current dividend of EU0.32PA you could expect 1.25 x 8p=10p or EU0.12 PA leaving a possible EU0.20 PA left for the ords

Thats in a perfect world, however in reality the prefs may trade on a yield as high as 9% whilst the ords may fall to a discount to nav again. (lets assume 10%)

Therefore when everything relists, the equivelent value could improve thanks to the reduced discount to NAV as follows: Level on ords at EU1.67 and prefs fall to 90p (EU0.73) x 1.25 = Grand total EU2.58 per shares.

I think like funds in the US are very relevent as they indicate the level of returns on these securities, prehaps you can tell us similar european funds RAT? I dont know any.

[zutalors] 17/8/2010 15:24

Given that the offer went ex-div retrospectively as it were, difficult to see why anyone would buy the ords now. See €1 in short order and dividend cut after completion of offer to re-adjust yield to approx where it was on 13 August.

[marben100] 17/8/2010 14:38

Hi Davidosh,

I'm happy to leave it Cheyne to decide what to invest in. After all, if I didn't trust their ability to select the best instruments, why invest with them in the first place?

HOWEVER, I am much less happy about QWIL raising further funds to finance this strategy (rather than trading existing assets) and the complexity of introducing the pref share structure. By bulking up the fund, they increase their fees [cf DDC/CPT, davidosh]. ;0) On the positive side, however, at least an open offer has been included for the fund raising, rather than simply undertaking a placing, thus giving all shareholders access to cheap shares.

I shall read the prospectus, when it comes, with a cynical eye.

Concerning Rat's good post above, don't forget that shareholders will receive 1.25 prefs for each ord, so using rat's figures, that gives a total anticipated value per share held on 14th September of €2.1975, by my reckoning.

My current inclination is to keep the shares I've got & take up the open offer (I'm not going to turn down buying €2.20's worth of stock for €2.00). Might review my position once the split into prefs has occurred. I chiefly bought into this for the dividend, so I may well swap ords for prefs at an appopriate time (or just sell the ords). If others think likewise, however, that may depress the price of the ords, once the split has gone ahead. If it does, then I may defer selling.

However, all of that is subject to my view once I've seen & read the prospectus.

Cheers,

Mark

[bisiboy] 17/8/2010 13:33

risk attack
a very good post i would broadly agree